RMB in SDR, now what?

“Governments propose, markets dispose,” as Charles Kindleberger liked to say. Starting next year the RMB will be included in the official SDR basket, and that inclusion will have some immediate automatic consequences for official government reserve holdings, but that’s all.  History tells us that you don’t get to be a world reserve currency just because a group of finance ministers

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EME vulnerabilities and the Fed

On 13 September the BIS released its latest Quarterly Review placing emerging market vulnerabilities at centre stage.  On 17 September, the FOMC voted against raising its target policy rate, citing near-term headwinds for the US coming from abroad.  “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in

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Defending the RMB

It’s hard to short China, but not so hard to short China’s currency, and that’s a problem for the central bank. We’ve all heard about PBOC intervention in the spot exchange market, where the central bank is selling some of its vast horde of USD Treasury securities and buying RMB (thus shrinking its own balance sheet, since RMB are its

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China’s Rocky Road Ahead, Financial Liberalization versus Financial Stability

A summary of the 3rd annual joint conference of the People’s Bank of China and the International Monetary Fund offers a snapshot of the state of debate.  So-called “renminbi internationalization” has been official policy since 2009.  By the end of this year, expect to see the launch of a new “China International Payments System” to facilitate use of RMB as a

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